Syllabus: GS2/Polity and Governance; GS3/Economy
Context
- Recently, the Electricity (Amendment) Bill, 2025 was unveiled to reform the electricity sector in India.
Key Features of the Bill
- Structural Reforms: Bill aims to facilitate regulated competition in electricity distribution, allowing multiple licensees to operate in the same area using shared and optimized infrastructure.
- It mandates Universal Service Obligation (USO) for all licensees, ensuring non-discriminatory access and supply to all consumers, while enabling SERCs to make Distribution licensees free from USO, in consultation with State Governments, for large consumers eligible for Open Access (more than 1 MW).
- Tariff and Cross-Subsidy Rationalisation: Bill promotes cost-reflective tariffs while protecting subsidised consumers (e.g., farmers, poor households) through transparent budgeted subsidies.
- It seeks elimination of cross-subsidy for the Manufacturing Industry, Railways, and Metro railways within five years.
- Infrastructure and Network Efficiency: Bill empowers Appropriate Commissions to regulate wheeling charges and prevent duplication of distribution networks.
- Introduces provisions for Energy Storage Systems (ESS) and defines their role in the electricity ecosystem.
- Governance and Regulatory Strengthening: Bill aims to establish an Electricity Council for Centre-State policy coordination and consensus-building.
- It empowers State Electricity Regulatory Commissions (SERCs) to enforce standards, penalise non-compliance, and determine tariffs suo moto if applications are delayed.
- Sustainability and Market Development: Bill aims to strengthen obligations for non-fossil energy procurement, with penalties for non-compliance.
- It promotes power market development, including new instruments and trading platforms.
- Legal and Operational Clarity: Bill introduces detailed provisions for the Electric Line Authority, including compensation, dispute resolution, and coordination with local authorities.
- The power of the Electric Line Authority will be the same as the Telegraph Authority under the Indian Telegraph Act, 1885.
| Electricity Sector in India – Overview – Electricity is one of the eight core industries of an Indian economy having a weightage of 19.85% only after the refinery sector. – Constitutional Status: Electricity is in the Concurrent List, enabling both Centre and States to legislate. – Global Standing: 1. India is the 3rd largest producer and consumer of electricity. – Installed Capacity (June 2025): 476 GW – Rising Consumption: 1. FY25 consumption: 1,694 billion units, 33% higher than FY21. 2. Peak demand in FY26 projected: 277 GW 3. Expected 6–6.5% annual energy demand growth next five years |
Challenges Facing Electricity Sector in India
- High AT&C Loss: Persistent financial losses in distribution companies (discoms) due to poor billing efficiency, high aggregate technical and commercial (AT&C) losses.
- Lack of Competition in Electricity Supply: Consumers tied to a single discom, limiting service quality and innovation.
- Cross-subsidisation Distortions: Industrial users pay inflated tariffs to subsidise other categories, making Indian manufacturing less competitive.
Related Steps Taken
- Revamped Distribution Sector Scheme (RDSS): Approximately 20.33 crore smart meters have been sanctioned in 28 States/ UTs, smart meters help the distribution utilities in improving their billing efficiency.
- Inter-State Transmission System (ISTS): It was built on shared infrastructure. Both public and private Transmission Service Providers (TSPs), including Powergrid (a CPSU), compete to develop ISTS assets under the oversight of the Central Electricity Regulatory Commission (CERC).
- Renewable Energy Push:
- National Solar Mission: Targets for large-scale solar capacity.
- Growth in wind, small-hydro, biomass, and green hydrogen sectors.
- Renewable Purchase Obligations (RPOs) for distribution companies.
- Solar parks, rooftop solar schemes, and incentives for storage solutions
- Improving Transmission Infrastructure:
- Green Energy Corridor to transmit renewable power efficiently.
- Strengthening inter-state & intra-state transmission networks.
- Greater grid reliability with National Grid integration.
- Universal Electrification Initiatives:
- DDUGJY: Rural electrification and feeder separation.
- Saubhagya Scheme: Achieved universal household electrification.
- Smart prepaid meters to reduce billing inefficiencies.
- Promoting Clean & Efficient Energy:
- Shifting from older inefficient coal plants to supercritical technologies.
- Increased emphasis on energy efficiency via:
- Standards & Labelling Programme
- Perform, Achieve & Trade (PAT) Scheme
- LED distribution under UJALA Yojana
- Innovation & Future Technologies:
- Smart Grids, battery storage, and EV charging infrastructure.
- Push for Green Hydrogen Mission to decarbonize future power demand.
- Attracting Investments:
- FDI in the power sector including renewables.
- Public–Private Partnerships (PPP) in transmission & generation.
Source: PIB
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